United States Of America v. Tellez et al
ORDER that United States lien against Jose R. Tellez is foreclosed against the property and Further Ordered that the property be sold pursuant to an Order for Sale to be entered by the Court. Signed by Judge Kathleen Cardone. (mc4, )
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
UNITED STATES OF AM ERICA,
JOSE R. TELLEZ, et al.,
The government brought this suit on August 6, 2008, seeking to seize and sell a property
described as Tract 18-D-1 Block 15, Ysleta Grant, an addition to the City of El Paso, El Paso
County, Texas, whose address is 8134 Knowles Way, El Paso, Texas (“the Property”). See Am.
Compl., ECF No. 7. The Property allegedly belongs to Jose Tellez, at least in part. Id. The
government is seeking to sell the Property to satisfy a tax lien concerning certain unpaid taxes owed
individually by Jose Tellez. See id. ¶ 8; see also 26 U.S.C. § 7403 (providing for such seizures and
In January 2009, the Court entered default judgment against Jose Tellez and his wife Lazara
Tellez (“Jose” and “Lazara”; collectively, “Tellezes”). Order, Jan. 14, 2009, ECF No. 18. Several
months later, in June 2009, the Tellezes objected to the seizure and sale, see Mot. to Set Aside
Default Judgment, ECF No. 28, and the Court set aside the default judgment. See Order, July 13,
2009. The Tellezes’ subsequent defense during two rounds of summary judgment motions and at
trial has been that Lazara has a share of a homestead interest in the Property under Texas law, and
that the government should not be allowed to liquidate her homestead interest because she is not
liable for the taxes at issue. See Defs.’ Answer ¶ 11, ECF No. 43.
The Tellezes have also asserted that the Property is Jose and Lazara’s community property
through their common law marriage. Id.; Defs.’ Mot. for Summ. J. ¶ 5, ECF No. 45; see also
Defs.’ 2d Mot. for Summ. J. 3 n.6, ECF No. 59. During the year and a half of pretrial motions, the
government did not contest the issue. Gov’t’s Resp. to Defs.’s Mot. for Summ. J. 2, ECF No. 46.
But in its trial preparation filings, the government withdrew its proposed stipulation as to Lazara’s
community property ownership, and instead stated its position to be that “[t]he United States agrees
with GECU that Lazara Tellez has no interest in this property.” Gov’t’s Trial Prep. “Section C”
Material 3, ECF No. 100 (emphasis in original).
GECU was joined as a defendant in this case because it had a lien on the property to secure
a mortgage issued to Jose Tellez. Def. GECU’s Resp. to Gov’t’s Mot. for Summ. J. ¶¶ 11-13, ECF
No. 81. GECU asserted at the beginning of the case that its held a purchase money mortgage, and
therefore its lien on the Property was superior to the government’s lien. Id. Neither the government
nor the Tellezes ultimately disputed this assertion. See Defs.’ Jose and Lazara Tellez’s Trial Prep.
“Section C” Material 3-4, ECF No. 101; Def. GECU’s Section C Am. Trial Prep. Order
Compliance 3, ECF No. 102. However, on May 20, 2011, GECU represented to the Court that it
had released its lien and asked that it be dismissed from the case. Mot. to Dismiss GECU, ECF No.
105. Consequently, with neither the government nor the Tellezes objecting to GECU’s motion to be
dismissed, the Court dismissed GECU as a defendant on June 3, 2011. See Order, June 3, 2011,
ECF No. 109.
The Court determined by summary judgment that Jose owes the United States in excess of
$58,825.69 for unpaid taxes. Order 11, Mar. 25, 2011, ECF No. 92. The Court also determined
that the government has a valid lien for the same amount against all of Jose’s real and personal
property, including the Property. Id.
On May 26, 2011, the Court held a trial on the merits of this case. Having reviewed the
evidence on the record, the Court makes the following findings of fact and conclusions of law
pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.1
FINDINGS OF FACT
The Court finds the following facts:
Jose is the sole owner of the Property, and to the extent that he is married to Lazara the
Property is Jose’s separate property.
Jose currently resides at 520 Martha Way, El Paso, Texas (“520 Martha Way”), so as to
care for his sister and elderly parents who live at 529 Martha Way.
Jose operates a business out of the Property.
Lazara has worked intermittently at the business operated by Jose Tellez.
Jose and Lazara listed their address on their 2005, 2006, and 2007 tax returns and IRS
Forms W-2 as 520 Martha Way. The tax returns for all three years were filed in April 2008.
Jose and Lazara listed their address on their 2003 and 2004 tax returns as 8134 Knowles
Way. The tax returns for 2003 and 2004 were filed in November 2008.
Jose filled out an IRS form in March 2008 indicating he had lived at 520 Martha Way for
CONCLUSIONS OF LAW
In light of the foregoing findings, the Court makes the following conclusions of law.
The government brought this action pursuant to I.R.C. § 7403, which provides that the
To the extent that any finding of fact is more aptly characterized as a conclusion
of law, or any conclusion of law is more aptly characterized as a finding of fact,
the Court adopts it as such.
United States may bring an action to enforce a tax lien. Section 7403 states that in such an action,
The court shall, after the parties have been duly notified of the action, proceed to
adjudicate all matters involved therein and finally determine the merits of all claims
to and liens upon the property, and, in all cases where a claim or interest of the
United States therein is established, may decree a sale of such property, by the proper
officer of the court, and a distribution of the proceeds of such sale according to the
findings of the court in respect to the interests of the parties and of the United States.
I.R.C. § 7403(c).
The nature and validity of parties’ claims to property that is subject to a tax lien are governed by
state law. United States v. Rodgers, 461 U.S. 677, 683 (1983) (“[I]t has long been an axiom of our
tax collection scheme that, although the definition of underlying property interests is left to state law,
the consequences that attach to those interests is a matter of federal law.”). The placement of the
burden and weight of proving the validity of such claims is also a matter of state law. See
Computer Econ., Inc. v. Gartner Grp., Inc., 50 F. Supp. 2d 980, 990-91 (S.D. Cal. 1999) (“State
rules that define the elements of a cause of action, affirmative defenses, presumptions, burdens of
proof, and rules that create or preclude liability are so obviously substantive that their application in
diversity actions is required.”) (citing, inter alia, Guaranty Trust Co. of New York v. York, 326 U.S.
99, 109-11 (1945) (federal court must apply state law specifying length of applicable statute of
limitations); Dick v. N.Y. Life Ins. Co., 359 U.S. 437, 446-47 (1959) (federal court must apply state
law presumptions and burdens of proof); Woods v. Interstate Realty Co., 337 U.S. 535, 538 (1949)
(federal court must apply state statute precluding corporations not qualified to do business in state
from filing suit)).
Under Texas law, a homestead is a “family home or place of business . . . exempted from the
reach of most creditors,” and the “‘owner or claimant of the property claimed as a homestead may
not, if married, sell or abandon the homestead without the consent of the other spouse.’” Rodgers,
461 U.S. at 684-85 (quoting Tex. Const. art. XVI, § 50). A homestead interest is an estate in land,
rather than just an economic right. Dominguez v. Castaneda, 163 S.W.3d 318, 329 (Tex. App.
2005) (citing Sanchez v. Telles, 960 S.W.2d 762, 769 (Tex. App. 1997); Laster v. First Huntsville
Props. Co., 826 S.W.2d 125, 129 (Tex. 1991)). If a homestead is established by a couple, it has the
effect of “‘reducing the underlying ownership rights in [the property] to something akin to remainder
interests and vesting in each spouse an interest akin to an undivided life estate in the property.’” Id.
at 329-330 (quoting Sanchez, 960 S.W.2d at 769). The burden is on the individual or couple
asserting the homestead interest to establish that they have such an interest, and to do so they must
“show a combination of both overt acts of homestead usage and the intention . . . to claim the land as
a homestead.” Id. at 330 (citing Sanchez, 960 S.W.2d at 770). Mere ownership of a property alone
is insufficient to establish it as a homestead, as is mere residence; it is “[p]ossession and use of land
by one who owns it and who resides upon it [that] makes it the homestead in law and fact.” Id. at
331 (citing Sanchez, 960 S.W.2d at 770; Silvers v. Welch, 91 S.W.2d 686, 688 (Tex. 1936)).
If a court determines that a party who is not liable to the government for unpaid taxes has an
interest in property subject to a tax lien, that court may prevent the government from conducting a
forced sale. Rodgers, 461 U.S. at 706. Proceedings under § 7403 are proceedings in equity, and
“some limited discretion is left in the statute for the exercise of reasoned discretion.” Id. This
discretion is not “unbridled,” however. Id. at 709. When deciding whether to protect an innocent
third party’s interest by preventing foreclosure, a “certain fairly limited set of considerations will
almost always be paramount.” Id. at 709-10. These factors include prejudice to the government
from preventing a forced sale, whether the third party could expect that the property would be
subject to forced sale by the debtor or the debtor’s creditors, the prejudice to the third party from
being dislocated or undercompensated by a forced sale, and the character and value of the third
party’s interest relative to the debtor’s interest. Id. at 710-11. These four factors are not exhaustive,
however, and are not to be applied as a mechanical checklist. Id. at 711.
Having already established by summary judgment that Jose Tellez is indebted to the United
States for an amount in excess of $58,000 and that the United States has a valid lien against Jose’s
interest in the Property for the same amount, and having dismissed GECU based on its
representation that it no longer has an interest in the property, the Court proceeds to examine the
only interests the remaining Defendants have asserted: Lazara’s community property interest in the
ownership of the Property and her share of the Tellezes’ alleged homestead interest in the Property.
Lazara’s community property interest
The Court concludes that Lazara has no community property interest because the Tellezes
introduced no evidence of such ownership at trial. Lazara’s asserted community property interest in
the Property could only exist through marriage to Jose, and the Tellezes have previously argued that
Jose and Lazara have a common law marriage. See Defs.’ 2d Mot. for Summ. J. 3 n.6 (admitting
the Tellezes were divorced in 1991, but alleging that they subsequently became common law
married in 2001). To prove a common law marriage in Texas, one must show the putative spouses
agreed to be married, cohabited as husband and wife after making the agreement, and held
themselves out as married. Russell v. Russell, 865 S.W.2d 929, 932 (Tex. 1993). The evidence in
the trial record concerning these elements consists of references by Jose to Lazara as his wife,
testimony that Jose and Lazara filed their federal taxes jointly as a married couple during the 2003
to 2007 tax years, and references to Jose and Lazara living at 520 Martha Way during those tax
years. There is also some conflicting evidence on the issue of cohabitation, in that Lazara
apparently spent considerable time staying at 529 Martha Way to care for sick family members.
Based on this record, the Court cannot conclude that Jose and Lazara have a common law
marriage. The tax returns are sufficient to prove the Tellezes’ held themselves out as married, and
the conflicting evidence might establish cohabitation, but there is no evidence of an agreement by
Jose and Lazara to be married. The Court might use the evidence of cohabitation and ‘holding out’
as circumstantial evidence of an agreement, but sufficient proof of cohabitation and ‘holding out’ is
not necessarily sufficient proof of an agreement. See id. at 933. Because Lazara did not testify at
trial and Jose did not discuss the issue in his testimony, there is no other evidence in the record from
which to deduce whether Lazara agreed to marry Jose. Therefore, the Court finds there is
insufficient evidence of an agreement by Jose and Lazara to be married, and so the Court cannot find
that Jose and Lazara have a common law marriage.
Even if the Court were willing or able to conclude from the record that Jose and Lazara do
have a common law marriage, that would not change the outcome. “All property, both real and
personal, of a spouse owned or claimed before marriage . . . shall be the separate property of that
spouse . . . .” Tex. Const. art. XVI, § 15; Parnell v. Parnell, 811 S.W.2d 267, 269 (Tex. App.
1991) (property deeded to one spouse one month before marriage found to be that spouse’s separate
property). To find Lazara has a community property interest, then, the Court must determine when
the Tellezes became married and when Jose acquired the Property. The earliest beginning date for
the marriage supported by the trial record is April 2008, since that is the date the Tellezes filed their
2003 tax return, which is the first evidence of the Tellezes’ holding themselves out as married.
Alternatively, the Court might credit the Tellezes’ assertion in their second summary judgment
motion that they began living together as common law husband and wife on September 15, 2001.
See Defs.’ 2d Mot. for Summ. J. 3 n.6. But the evidence at trial indicated that Jose Tellez acquired
the Property on August 6, 2001. On its face, then, even giving the Tellezes the benefit of the doubt
and looking outside the trial record, Jose’s ownership of the property predates the marriage, and thus
the Property is his separate property. See Parnell, 811 S.W.2d at 269. This is corroborated by
Jose’s testimony at trial that he alone was the owner of the Property. Therefore, even if the Tellezes
are validly married at present, without proof that they were married when Jose acquired the
Property, the Court cannot find that Lazara has a community property interest in the Property.
It is possible that the Tellezes did not contest the community property issue at trial because
they believed it had already been determined by the Court. See Defs.’ Jose and Lazara Tellez’s
Trial Prep. “Section C” Material 3. The Court did describe the Property in its summary judgment
orders as belonging to both Jose and Lazara, but this was not a ruling, merely a description of the
background facts based on the absence of any disagreement on the point. See Order 1, Jan. 27,
2010, ECF No. 51 (“To summarize these facts briefly, the United States is seeking to seize and sell
a house belonging to Defendants Jose and Lazara Tellez”); Order 1, Mar. 25, 2011, ECF No. 92
(“The government seeks to seize and sell a house belonging to Defendants Jose and Lazara Tellez”).
The Court never formally adjudicated the issue of Lazara’s community property interest. Nor could
the Court have impliedly granted summary judgment for the Tellezes on the issue, since the Court
denied both of the Tellezes’ summary judgment motions. Additionally, even if the Tellezes believed
that the issue had been settled by the Court’s prior rulings, the Tellezes never argued that point to
the Court in response to the government’s assertion just before trial that Lazara held no interest in
the property whatsoever. And Lazara never appeared at trial to assert her community property
interest, and did not even observe the proceedings. In light of all the evidence at trial, the Court
concludes that the Tellezes have failed to establish that Lazara has a community property interest in
Lazara’s undivided share of the homestead interest
The Court similarly has little difficulty in concluding from the trial record that the Lazara
has no homestead interest in the Property. For Lazara to have a share in the homestead, she must be
married to Jose and they must have together made the Property their homestead. See Denmon v.
Atlas Leasing, L.L.C., 285 S.W.3d 591, 596 (Tex. App. 2009) (“the claim of a family homestead is
not maintainable by a man and woman living together in an unmarried state”) (citing Tremaine v.
Showalter, 613 S.W.2d 35, 37 (Tex. App. 1981); Cadle Co. v. Ortiz, 227 S.W.3d 831, 836 (Tex.
App. 2007) (“a person is permitted to hold homestead rights in his or her spouse’s separate
property”) (emphasis added). The Tellezes held the burden at trial of proving the existence of a
homestead. See Dominguez, 163 S.W.3d at 330. To meet this burden, the Tellezes had to show
both residence on and ownership of the Property. See id. at 330.
Leaving aside the lack of evidence of a valid marriage, which is set forth above, the Tellezes
failed to carry the burden of proving the existence of a homestead. They called only one witness,
Jose, and were able to admit no documentary evidence. The Tellezes did establish that Jose owns
the Property, but there is no indication that Jose or Lazara ever lived on the Property. Jose testified
that his “home” was at the Property, but he also stated that he was living elsewhere. “[T]he word
‘home’ is not necessarily synonymous with ‘homestead,’” Dominguez, 163 S.W.2d at 331 (citing
Sanchez, 960 S.W.2d at 912); to establish a property as a homestead a family must own the
property, live on it, and intend for it to be their homestead. Id. Lacking any evidence that Jose or
Lazara ever lived on the Property after Jose acquired title to it, the Court concludes that the Tellezes
failed to meet their burden of proving the Property is their homestead.
Moreover, even if the government, as Plaintiff, had the burden of proving the Property were
not a homestead, the Court would find it carried that burden. Jose testified that he currently resides
at 520 Martha Way, not at the Property. Jose filled out a form indicating to the IRS that he had
resided at 520 Martha Way for twenty-six years. Gov’t’s Ex. A, at 1, ECF No. 108. The only use
of the Property he discussed at trial was using it as a home business, as evidenced by his requests for
home business permits from the City of El Paso. Jose also admitted that he and Lazara listed 520
Martha Way as their address on numerous tax returns and W-2 forms, and that he had received mail
there. In light of this testimony, the government has effectively disproved the Tellezes’ claimed
The record indicates that since acquiring the home, Jose and Lazara lived on other properties
in the neighborhood to care for their sick relatives, and that they only used the Property as a place of
business. Texas law does provide for a variant on the homestead known as a business homestead,
but that type of interest is still only available if an individual or family uses a property both as a
home and a business. Tex. Const. art. XVI, § 51 (urban homestead must be “used for the purposes
of a home, or as both an urban home and a place to exercise a calling or business, of the homestead
claimant”). It is also true that temporarily living away from a homestead for health reasons will not
necessarily constitute abandonment of a homestead. See Churchill v. Mayo, 224 S.W.3d 340, 345
(Tex. App. 2006) (citation omitted). But in this case, without evidence that the Tellezes ever lived
on the Property to begin with, there was never a homestead to abandon. That the Tellezes have
apparently only lived elsewhere since Jose acquired the property is itself sufficient to defeat any
notion that the Property became the Tellezes’ homestead.
In light of all the evidence introduced at trial, the Court must conclude that the Property is
not the Tellezes’ homestead, so Lazara necessarily also does not have any share of a homestead
interest. With no one besides Jose holding any interest in the Property at this point, the government
should be allowed to proceed with a forced sale.
Even if the Property were a homestead, or if Lazara were to have some other ownership
interest, the Court would still allow a forced sale to occur. Section 7403 gives the Court the
discretion to prevent a forced sale, but that discretion is limited. See Rodgers, 461 U.S. at 706. The
factors the Court should consider when deciding to exercise its limited discretion to prevent a forced
(1) the extent to which the Government’s financial interest will be prejudiced if it
were relegated to a forced sale of the partial interest (rather than a sale of the whole
property with the proceeds divided among the competing interests); (2) the innocent
third party’s legally recognized expectation that his or her interest in the property
would not be subject to a forced sale; (3) the prejudice to the third party from
replacing the homestead interest with proceeds, including the costs of dislocation;
and (4) the relative character and value of the liable and non-liable interests in the
United States v. Caraway, No. A-06-CA-972-SS, 2008 WL 2510668, at *4 (W.D. Tex. Apr. 24,
2008) (citing Rodgers, 461 U.S. at 710-711).
The Court finds that the balance of these equitable factors does not favor preventing a forced sale.
First, as have other courts in the Western District, the Court finds “[t]he sale of a partial interest in
the residence would bring far less money than the United States could expect to receive from a sale
of the whole residence with proceeds divided among the interested parties - a single-family residence
is simply not the type of property that lends itself to a partial sale.” Caraway, 2008 WL 2510668,
at *4. Second, while under Texas homestead law Jose could not sell any portion of the Property
without Lazara’s consent, see Tex. Const. art. XVI, § 50(b), since Rodgers it has been clear that a
federal tax lien could result in a forced sale. See Caraway, 2008 WL 2510668, at *4. Third, since
there is no indication that Lazara presently resides on the Property, there would be no prejudice to
replacing her interests in the Property, if any, with the value of those interests as a share of the
proceeds of the sale. And fourth, any interest Lazara might have in the Property with Jose would be
shared equally with Jose, so the relative character and value of Lazara’s interest would not favor
preventing a forced sale. None of the factors favors the exercise of the Court’s discretion to prevent
a sale, so the government should be allowed to proceed.
In concluding that Lazara has no homestead interest in the Property, indeed no ownership
interest in the property whatsoever, and that the government should be allowed to conduct a forced
sale, the Court notes that the Tellezes’ counsel’s presentation of evidence at trial was decidedly
deficient. Counsel for the Tellezes failed to present a single admissible piece of documentary
evidence, and what little testimonial evidence he elicited from Jose was wholly inadequate to carry
the Tellezes’ burden. Counsel failed to elicit any testimony on the subject of whether the Tellezes
have ever lived at the property, or present any evidence on the issue of whether Lazara has any
community property interest in the ownership of the Property by virtue of her marriage to Jose.
Because of this inability or refusal to present a case, the Court’s determination here is based on
almost no evidence; the trial provided the Court with little better understanding of the factual
circumstances underlying this dispute than did the various motions filed by the parties over the past
The absence of evidence for the Court to consider is troubling, given the protracted length of
the proceedings before trial. Since the beginning of this case the Tellezes’ defense to forced sale has
been Lazara’s homestead interest. However, Lazara did not even attend the trial, much less testify.
Additionally, the Tellezes’ counsel mustered several affidavits and documentary evidence to support
its case at the summary judgment stage, but did not seek to introduce any of that evidence at trial.
At present, it appears that the thin trial record is either a result of the Tellezes’ counsel’s exceedingly
poor trial skills or proof that the Tellezes and their counsel have been asserting a defense for two
years that had no basis in law or fact. Either way, the Tellezes’ counsel should think twice before
employing a similar litigation strategy in the future.
For the foregoing reasons, the Court enters the following orders:
The Court DECLARES that the property located at Tract 18-D-1 Block 15, Ysleta Grant,
an addition to the City of El Paso, El Paso County, Texas, whose address is 8134 Knowles
Way, El Paso, Texas, is not the homestead of Jose or Lazara Tellez.
IT IS ORDERED that the United States’ lien against Jose R. Tellez is foreclosed against
the property located at Tract 18-D-1 Block 15, Ysleta Grant, an addition to the City of El
Paso, El Paso County, Texas, whose address is 8134 Knowles Way, El Paso, Texas.
IT IS FURTHER ORDERED that the property located at Tract 18-D-1 Block 15, Ysleta
Grant, an addition to the City of El Paso, El Paso County, Texas, whose address is 8134
Knowles Way, El Paso, Texas, will be sold pursuant to an Order for Sale to be entered by
Within one week of the date of this Order, the United States SHALL file a verified
supplemental schedule of the total amount owed by Jose R. Tellez for the taxes at issue in
Within one week of the date of this Order, the United States SHALL submit a proposed
Order upon which Final Judgment may be entered, detailing the conditions of the foreclosure
sale and the division of proceeds.
SIGNED on this 6 th day of June, 2011.
UNITED STATES DISTRICT JUDGE
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